Price & Market BehaviorCore researchlive in productionNew

Option IV Skew Drift

Updated dailyData needs: mediumlong onlyshort onlylong short

2010

Cremers, M., & Weinbaum, D. (2010). "Deviations from Put-Call Parity and Stock Return Predictability." Journal of Financial and Quantitative Analysis, 45(2), 335-367.

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In plain terms

When put options become unusually expensive vs in-the-money puts, the market is bracing for a drop. Stock usually recovers as the panic fades.

How it works

Put-side IV smile steepness (sotm_iv - sitm_iv) z over 252d. Rising skew prices tail risk; reverts via underlying drift up.

Live results

0 times picked on its own · 37 times inside a blend (37 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 37 such blended picks (37 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

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Data dependencies

Options chain daily
End-of-day OPRA option chains used by IV-skew family.
Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.

Expected edge

Reported return: ~3-7%/yr
Reported Sharpe: ~0.6
Tested over: T+1 to T+21d

Cremers-Weinbaum 2010 JFQA: ~3-7%/yr on liquid single names.

Example tickers where this is likely to fire

AAPL NVDA TSLA SPY QQQ

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

Single Name Variance Risk PremiumPrice & Market Behavior

When option-implied volatility is much higher than recently realized, options are expensive. Stock tends to drift up as the fear premium burns off.

Option Call Put Volume ImbalancePrice & Market Behavior

When unusual call buying surges (vs trailing baseline), informed traders are loading up via options. Stock tends to follow up over the next 1-3 weeks.

Explore Option IV Skew Drift on alphactor.ai

See which tickers this family is currently firing on, with live signals and rankings.

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